Global markets rebound after Omicron turmoil

LONDON: Global stock markets rebounded on Wednesday and oil prices surged; following Omicron-driven losses and on the eve of a key output meeting of Opec and its allies.

The European equities advanced, mirroring most rebounding Asian bourses, as dealers temporarily set aside news of record-high eurozone inflation.

Oil surged around 5 per cent, while the dollar extended gains against major rivals as the Federal Reserve is seen removing its vast financial support measures at a quicker pace than first flagged.

Rollercoaster ride

Investors were facing a rollercoaster week, as they track the mutant Omicron strain, whose emergence last Friday darkened the economic outlook, sparked fresh Covid restrictions and ravaged most markets.

Traders remain uncertain over its impact on the world economy and the likelihood of fresh lockdowns, as scientists rush to investigate the variant and urge speedy vaccination drives.

“An ugly combination of a Covid-related knock to growth, reduction in central bank support and sustained inflation is not a recipe for strong stock markets,” AJ Bell investment director Russ Mould said.

“However, some traders appear to have decided the weakness has gone far enough for now, as they emerged to bid up stocks and oil.”

Opec and the oil cartel’s allies hold a key output meeting on Thursday, having resisted the US-led pressure to step up production and to bring down the surging energy prices, while emergence of the new variant has complicated the equation.

‘Economy under threat’

The OECD grouping of major industrialised nations on Wednesday warned that Omicron threatens the global economic recovery, as it lowered the 2021 growth outlook and called for a swifter vaccines rollout.

The global economy is now expected to expand 5.6 per cent this year, down from a forecast of 5.7 per cent, the OECD said in its latest outlook.

Top drug makers have offered differing opinions on their vaccines’ efficacy against Omicron.

Markets took a tumble on Tuesday after Moderna head Stephane Bancel told the Financial Times that the existing vaccines might not be as effective against the new strain.

However, other drug makers later said it was far too early to make a judgement.

The boss of BioNTech, which made a shot with Pfizer, said it was likely people would be protected against severe symptoms.

“If by this time next week the medical gurus have concluded that existing vaccines are sufficient and/or the Omicron virulence is milder than the current Delta variant, the market should bounce strongly,” strategist Louis Navellier said.

“Conclusions the other way could weigh heavily on the current bullish outlook for 2022,” he added.